Global packaging machinery production value stood at around US$48 billion in 2012, following robust growth of 10% that year. Over 2006-2012, production growth averaged 7% annually in spite of more than a 5% year-on-year contraction in 2009. Although four out of five dominating producers are developed countries, China emerged as the largest producer and consumer of packaging machinery globally and future growth potential lies mainly in Southeast Asia and Latin America.
Largest Packaging Machinery Manufacturers: Production value, constant US$, 2006 and 2012
Source: Euromonitor International
China – the main producer and consumer
In 2008, China became the leading producer of packaging machinery, while its major competitors in Europe and North America suffered from the financial and economic recession. China recorded a 25% CAGR for packaging machinery production value over 2007-2012, which is a staggering result compared with a 3% CAGR for Germany, 2% for Japan, 1% for Italy and a negative 2% CAGR for the US.
Largest Packaging Machinery Manufacturers: Production Growth 2007-2012
Source: Euromonitor International
Strong growth in China was observed mainly due to the booming local market, driven by growing Chinese manufacturing output, increasing consumer disposable incomes and the diversification of consumer needs in relation to packaging functionality and quality. Chinese demand for packaging machinery stood at over US$1 trillion in 2012, a figure more than twice that of the second biggest market for packaging machinery, the US.
Although further expansion in Chinese packaging machinery output is anticipated over the coming five years, the industry might be somewhat restricted by recent Chinese government plans to limit excessive packaging, which inflates consumer prices and damages the environment. The government is working towards the issuance of new regulations aimed at reducing the incidence of over-packaging and unnecessary waste. This will impact the usage of primary and secondary packaging.
Germany remains the largest exporter
The second largest producer of packaging machinery globally is Germany. Industry revenue stood at over US$7.5 billion in 2012, or 15% more than in 2006. However, Germany has still not fully recovered from the global economic recession, which hit the country hardest in 2009 when industry revenue dropped by more than 20%. Germany was the most affected country of the top packaging machinery producers because German products are of a higher quality and are thus more expensive compared to those of the other main producers globally. The industry is expected to recover to the 2008 level of around US$7.9 billion in 2014, driven by exports to developing countries.
Germany remains the largest exporter of packaging machinery in the world, with exports amounting to over US$5.3 billion in 2012. The country has well-established trade routes to developed countries such as the US, France and Italy. However, in recent years, growth has increasingly originated from developing countries such as China, Russia and Brazil. In 2006, German packaging machinery exports to China accounted for a meagre 3% of the total, while in 2012 the figure stood at 9%, second only to the US. Overall, Germany has managed to build a diversified base of customers around the world but slow economic growth in the US – the largest client, accounting for 10% of exports – is hindering German manufacturers’ growth. Future prospects lie predominantly in booming Southeast Asian and Latin American markets, and so increasing exports to these regions could help Germany overcome stagnant demand in the EU and the US.
Future growth opportunities in Southeast Asia and Latin America
Despite the fact that four of the top five producers of packaging machinery are developed countries (Japan, the US, Germany and Italy), future opportunities lie in Southeast Asia and Latin America, mainly because of booming consumer expenditure and manufacturing output in key industries that need packaging, such as food, beverages, pharmaceuticals, home care and beauty and personal care.
More than half of packaging machinery is used in the food and beverage industries. To 2020, growth of consumer expenditure on food and non-alcoholic beverages is expected to be the strongest in the BRIC countries as well as in Indonesia, Mexico and Venezuela. As a result, eight of the top 10 countries by consumer expenditure on food and non-alcoholic beverages are expected to be developing countries. For established packaging machinery manufacturers, this brings two opportunities - increasing exports to these countries or establishing new production facilities in high growth regions.
Top 10 Countries by Consumer Expenditure on Food and Non-alcoholic Beverages: Constant US$, 2020 and 2012
Source: Euromonitor International
Another major packaging machinery customer group includes the manufacturers of pharmaceuticals, home care and beauty and personal care products. Among the major world economies, the strongest production value growth in this area is forecast in China, with around a 15% CAGR over 2013-2017. India, Russia, Saudi Arabia and Indonesia are also expected to record double-digit CAGRs over the next five years. Developed countries, on the other hand, will see considerably weaker growth, with a 1% CAGR forecast for Japan, 2% for Germany and 4% for the US. This will serve as an additional impetus for packaging machinery manufacturers to direct their investment at high growth regions.